Gijs van de Kuilen
Professor of Decision Making under Uncertainty Department of Economics
"A better understanding of how people make decisions in uncertain environments allows consumers, policymakers, firms, and other economics agents to make better decisions."
What is the main goal of your research?
Almost all every-day decisions that we take, whether it is crossing the street, buying a stock, taking up insurance, or deciding whether to undergo surgery, involve uncertainty. The main theme of my research is trying to understand how people make decisions in uncertain environments. The ultimate aim is to develop more accurate descriptive models of how people make decisions in such environments. Among other things, as part of an NWO VIDI grant, I am currently studying the role of basic emotions in explaining anomalous risky decision making. Does the fact that people become more fearful in times of economic downturn, leads them to avoid risks during a recession? Another part of my research involves the question of how people make risky decisions in the face of background risk. Do people change their (saving) behavior if their future income becomes more uncertain? For example, in one project I find that people are better able to cope with income risk if they are healthier, implying that people are inclined to invest more in tertiary preventive care if their future income becomes more uncertain. I mainly use the laboratory method in my research because the controlled environment allows me to uncover causal relations by exogenous variation.
How does your research contribute to societal problems?
A better understanding of how people make decisions in uncertain environments allows consumers, policymakers, firms, and other economics agents to make better decisions. For example, many people have a tendency to insure even the smallest risks such as travel cancellation insurance. In several papers, I have shown that this behavior is at least partly driven by the fact that people are overly sensitive to incurring a loss and to small probabilities: consumers are inclined to take travel cancelling insurance because they overweight both the loss that they will incur if they have to cancel their flight and the (tiny) probability that they indeed will have to cancel their trip. Making consumers aware of these behavioral biases will improve the quality of consumers’ decisions.
What is your main motivation?
I think that my main motive is curiosity regarding the way in which people make decisions and how this shapes economic outcomes. A new, unexpected finding immediately motivates me to delve deeper into the topic. I also enjoy interacting with students, and the fact that my teaching helps shaping their future career motives me to keep improving my ability to teach.
Who is your role model?
I do not have a particular role model, but the work of Tversky and Kahneman has inspired me to follow this line of research. Their work on decision making under uncertainty nicely illustrates how insights from psychology can inform and improve economics. In particular, their classic paper on Prospect Theory is a manifestation of the synergy between experimentation and formal modelling, which I also try to achieve in my work.